Too lazy to get up and turn off the lights? Now you can do it from your smart phone

This post explores how Phillips is embracing the rise of IoT by building smart light bulbs that can be controlled from a mobile phone.

Internet of Things changing way we interact with the modern world

Innovation in the digital technology space has changed the way people and companies interact with the world. As the number of mobile-enabled devices increases and companies aggregate and analyze more and more data, this level of innovation will accelerate further. In 2010, the number of computers on the Internet exceeded the global population1, driving increased interaction with Internet-enabled devices. This trend has continued to compound in recent years. As a result, the entire paradigm of how we interact with the Internet and the modern world will drastically change – driving the establishment and rampant adoption of the Internet of Things (IoT). A recent Gartner report found that 43% of enterprises plan to adopt IoT into their business models, which is expected to increase to 64% after this year2.

IoT is growing rapidly, with smart homes a major application area

IoT is rapidly evolving a number of industries traditionally untouched by the Internet, with the overall market projected to grow to $7.1 trillion by 20203. One of the main applications of IoT is for smart homes4, which is the second biggest area of IoT adoption behind smart energy5. Users can now lock their front door from their office, and can configure their residential security system from the road. With the recent mandate in 2014 to stop production of incandescent light bulbs6, smart light bulbs have surfaced as one of the interesting applications of IoT within the smart home segment.

Phillips is one company that has adopted IoT in its light bulb business

One company at the frontier of IoT adoption in the light bulb industry is Phillips. The recent regulatory changes, coupled with the advent of smart home devices, led Phillips to create a new product of light bulbs that leverages smart technology. These new light bulbs provide a considerably differentiated product for its customers. With the technology-enabled Phillips Hue, users can control lights remotely from their mobile device and can set schedules for when lights should turn on or off. The product also allows for automated dimming7.

In addition, you can customize the color, intensity, and brightness for each bulb, allowing users to get creative for different rooms. All of this can be done from a mobile device. It’s also integrated with Amazon’s new smart home device, Alexa. This creates a more interconnected smart home ecosystem, increasing overall convenience for smart home advocates as they can use Alexa to control lights as well. Finally, these light bulbs are more energy efficient than traditional light bulbs, driving considerable cost savings for the customer7.

Switch to smart light bulbs evolves business model for Phillips

This new product represents a deviation from Phillips’ previous business and monetization model for light bulbs. The light bulb business model is similar to that of the razor-razorblade model, where a user has an upfront device cost (the razor) and then an ongoing variable cost based on usage (water and blades in this example). In the light bulb model, the user also has some semblance of fixed and variable costs (the device itself and the energy it uses). While previous versions of light bulbs had a considerably lower upfront purchase cost, they were less efficient overall, leading to higher monthly energy payments to use the light bulbs (the variable costs).

In this model, Phillips offers a superior, differentiated product at a drastically higher fixed cost, but the design of the light bulb is such that the ongoing energy costs are considerably lower. While Philips does not directly receive the payment for energy usage, their pivot to this new product line will lead to them getting a greater share of consumer spending overall in this segment. In addition, these light bulbs have a considerably greater lifetime, offering a vastly different value proposition than their previous light bulb solutions, as they will now need to be replaced far less often.

Phillips should continue to invest in smart home integration & bulb technology

To continue the success of the product line, the company should continue to build out integrations with other IoT products, similar to what they’ve done with Alexa. Users are keen on convenience in this market, and integrating across multiple smart home devices would allow the Hue to become a stickier product in people’s homes. I also think the company should continue investing in the technology of the bulbs to innovate further and drive down cost. Right now, the light bulbs are very expensive, so if they can drive down the price of the product through innovation and R&D investment, they could yield far greater adoption. Overall, the company has done a good job of staying at the forefront of the IoT trend by adding a highly differentiated product for its customers, helping drive toward a ‘smarter’ world. (799 words).

Appendix: Bibliography

1”As Objects Go Online: The Promise (and Pitfalls) of the Internet of Things”, Foreign Affairs, 2014 http://heinonline.org/HOL/LandingPage?handle=hein.journals/fora93&div=39&id=&page, accessed November 2016.

2Gartner survey shows that 43 percent of organizations are using or plan to implement the Internet of Things by 2016”, BusinessWire, March 3rd 2016 http://www.businesswire.com/news/home/20160303005220/en/Gartner-Survey-Shows-43-Percent-Organizations-Plan, accessed November 2016.

3”Internet of Things: Technology and Value Added”, March 2015 http://search.proquest.com/openview/ac6643ce2897d57bbad03f45ba9436e1/1.pdf?pq-origsite=gscholar&cbl=816386, accessed November 2016.

4”The Research and Implement of smart home system based on Internet of Things”, IEEE, September 2011, http://ieeexplore.ieee.org/document/6066672/, accessed November 2016.

5”A Survey of Internet of Things from Industrial Markets Perspective”, IEEE, January 2015 http://ieeexplore.ieee.org/stamp/stamp.jsp?arnumber=7004894, accessed November 2016.

6Wolf, Michael, “5 Smart Home Companies to Watch in 2014,” Forbes, December 31st 2013, http://www.forbes.com/sites/michaelwolf/2013/12/31/5-smart-home-companies-to-watch-in-2014/#ddb3cca1ebe9, accessed November 2016.

7Phillips Hue product overview and specifications http://www2.meethue.com/en-us/productdetail/philips-hue-white-sk-a19#overview, accessed November 2016.

 

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6 thoughts on “Too lazy to get up and turn off the lights? Now you can do it from your smart phone

  1. It is great to see that Phillips is integrating sustainability with convenience in its pursuit of changing the light bulb. With an increased reliance on smart phones and mobile applications, people around the world will likely look to these innovative bulbs to not only save on energy usage, but also design their homes or offices with the customizable options. I can imagine that at some point not in the too distant future smart homes will only utilize these kind of interconnected bulbs. Phillips may be concerned that this business is ripe for competition, but I do not think competition will necessarily be a bad thing in this space. It will force the lighting companies to continue to innovate and constantly create more efficient bulbs for many different uses. It will also lower the prices of the bulbs, as you mentioned, making them more accessible to other parts of the population.

  2. Thanks for this Danny!

    I totally agree with you that even though the follow-up costs are already significantly reduced, lowering the upfront price of these will be key to Phillips’ success. I also think, given as you say that IoT and environmental consciousness are both burgeoning ideas, that the company will need to think of something that helps them stand out from other bulb producers in future. One thought would be whether they could customize the entire lighting fixture (rather than just the bulb) to be Phillips-specific. This could work in, for example, new build homes. But then I guess you return to the question of whether that’s truly scalable, or whether the inconvenience of not being able to run to the store to fetch any new lightbulb, and again the upfront cost, would deter any consumers.

  3. As a Philips hue owner, when I purchased the product I was very excited for my purchase. I thought that it was a game changer and would ultimately save me some time by giving me the option to turn on/off my lights from the convenience of my phone. After almost two years since I purchased the product, this is my experience.

    First, at $200 USD for only three light bulbs, it is truly a difficult pill to swallow. I bought it because I am a big fan of new technologies like this one. I did not buy it because I thought it was going to save me money on the long run.

    Second, I am not the only one in my apartment who turns on/off the lights. While my wife could also download the app and connect it to the light bulbs, she doesn’t really like the idea of opening an app and going through quite a few screens and clicks to get to the right bulb and just to turn a light off.

    Third, if someone was physically turned off the lights, you won’t be able to turn them back on from your phone. This can be frustrating, which eventually makes me just use the physical switch every time.

    Forth, while I usually keep my phone at an arm’s reach, this is not always the case. For those cases, you will still need to physical switch.

    The only time where I have found it very useful is when I in bed and I don’t want to get up and turn the lights off.

    After all this time, as the other posts have mentioned, I don’t think it is going to be a game changer for Philips unless it can bring the bulbs to price parity with other LED bulbs. Until then, I don’t think I will be buying more Phillip hue lightbulbs.

  4. Interesting read Danny. I echo Jorge’s comments on the actual functionality of the light bulbs. I question whether their suite of services are more of a gimmick, rather than an actual, incremental utility for the user. I think the ROI will come from the energy savings, but this is hard for a consumer to both understand and tangibly feel. Most buyers won’t do a DCF analysis to conclude that these bulbs will save them money over the next ten years through less energy usage. Furthermore, unless users change all the lights in their home, which might be prohibitively expensive, the energy savings from switching won’t be material. I’d argue that the energy savings Jorge felt from buying three of these bulbs wasn’t visible in his utility bill. In fact, energy usage might have been worse considering the usage/learning barriers between him and his wife.

  5. Thanks for a super interesting article, Danny! Surely these types of products will grow in importance as we shift away from incandescent blubs and become more conscious of the ongoing costs of our lighting.

    It looks like Alexa is already compatible with a number of smart bulbs[1], and Phillips Hue can be used with a range of connected home solutions[2]. Therefore, how does Phillips Hue truly differentiate itself versus competitors? Should it attempt exclusivity contracts with certain smart home solutions? Should it try to develop a model that does not require a Phillips Hub or really anything other than wifi, something like the TP-Link LB100 that is more plug-and-play? Given Jorge’s experience described above, I would also be curious to know how responsive Phillips has been to customer needs and iterating on its product – not being able to turn on a light with your phone because it was switched off manually seems like a major inconvenience.

    [1] Ry Crist, “Which smart bulbs should you use with Alexa”, CNET, 24 September 2016, https://www.cnet.com/news/which-smart-bulbs-should-you-use-with-alexa/, accessed November 2016.
    [2] Phillips Lighting B.V., “Friends of Hue”, http://www2.meethue.com/en-us/friends-of-hue/, accessed November 2016.

  6. This is an interesting post Danny! Products that cater to smart homes have already appeared on the market and are here to stay. While this Philips Hue bulb is a great product, I agree with Hugo and don’t find this extremely useful for a $200 price. At that price range I have seen a bunch of other smart home items such as Google home which is a voice activated speaker assistant that is available for $130 and offers a much wider range of services https://madeby.google.com/home/. I wonder what the exact motivation behind creating Philips Hues was other than the fact that you can change the colors through your smartphone. In fact you have products that allow you to control your heating / lighting / security from your smartphone and are available at a much better price range. Philips should focus more on ensuring that the newer bulbs technology is in fact more energy efficient while appealing to consumer tastes.

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